Peter Earl, Rurelec chief executive, said: “Bolivia has never gone to arbitration before — they have always settled beforehand. I think they thought we were a small company and they could bully us and we would cave.

“They never realised we had strong shareholders, or that we would get the support of the British Government.”

Rurelec raised money from shareholders to pay the legal costs of the arbitration process and said William Hague, the Foreign Secretary, had personally backed its case.

The company had said it would be willing for settle for a minimum of the book value of the assets, which it puts at $75m, plus interest. But Mr Earl said Bolivia had never even suggested a figure.

“Bolivia is trying to argue that they should only have to pay less than book value,” he said. “They claim we were a highly indebted company but that’s patently untrue.”

Rurelec’s share price collapsed after the nationalisation and now stands at 10¼p, down from 17¼p at the end of April 2010.

“Our book value is 20p per share,” Mr Earl said. “Just getting the book value settlement should mean the shares trade closer to the 20p than to 10p. It’s the uncertainty that... has been depressing the shares for the last three years.”

A conclusion to the dispute would mean Rurelec could “start being valued on the basis of our earnings and our assets rather than hope value”.

Rurelec has since expanded its operations in Chile and Peru. “Compensation at the higher end of the scale means we can roll out our expansion plans faster,” Mr Earl said. Compensation from Bolivia would also allow the company to buy back some of its shares and “finally return value to our supportive shareholders”.

Rurelec claims a decision not to pay compensation would have a “very negative impact on foreign investment into Bolivia”. The hearings are expected to finish on April 9, but a decision could take weeks.